Obamacare will raise premiums for 65% of small firms

Two-thirds of small businesses that offer health insurance to workers are likely to see premiums increase this year.

A majority of small businesses that offer health insurance could see premiums rise, according to a new government report.

The report from the actuary for the Centers for Medicare and Medicaid Services (CMS) estimates that 65% of small firms will likely incur higher premiums this year under Obamacare. This translates into higher costs for 11 million people.

However, the remaining 35% of small firms could see a reduction in their premium rates, which would reduce health insurance costs for 6 million people.

Before the Affordable Care Act went into affect,premium rates for small business group plans varied according to employees' health status or even gender, said Gary Claxton, vice president of the Kaiser Family Foundation.

In other words, firms that employed healthier workers could be offered below-average premiums for their group plans due to low expected health care needs.

"But if an employee became seriously ill, then that could also push up rates for everyone," said Claxton. Not to mention, firms that employed more women of childbearing age were commonly charged higher premiums.

But new rules under Obamacare leveled the playing field for all small group plans. As of Jan. 1, 2014, insurers can't charge different premiums based on health status, gender and health care usage.

The CMS report expects this to push up insurance costs for many small firms, since younger and healthier individuals can no longer expect lower premiums. But it will also make health insurance more affordable for older and sicker workers.

However, the report did note that under the ACA, some small businesses -- depending on number of employees, average salaries and insurance contributions -- could be eligible for tax credits. Analysts believe this could help offset premium hikes, according to the report.

Still, Claxton said premiums for grandfathered group plans will not be affected by the rule change, for now.